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Wells Fargo CEO John Stumpf speaks at the National Press Club - Sept. 17, 2014 — Transcript

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0:07good afternoon and welcome my name is
0:10myON Bine I'm an Adjunct professor at
0:12the George Washington University School
0:14of media and public affairs a former
0:17International bureau chief with the
0:18Associated Press and the 107th president
0:21of the national Press Club the national
0:24Press Club is the world's leading
0:25Professional Organization for
0:27journalists committed to our
0:29profession's future through our
0:30programming with events such as this
0:33while fostering a free press worldwide
0:36for more information about the national
0:38Press Club please visit our website at
0:41press.org on behalf of our members
0:44worldwide I'd like to welcome our
0:46speaker and those of you attending
0:48today's event our head table includes
0:50guests of our speaker as well as working
0:52journalists who are club members and so
0:55if you hear Applause in our audience I
0:56note that members of the general public
0:58are attending and so it's not
1:01necessarily evidence of a lack of
1:03journalistic
1:05objectivity I'd also like to welcome our
1:08C-SPAN and public radio audiences you
1:10can follow the action on Twitter using
1:13the hashtag NPC lunch after our guest
1:17speech concludes we'll have a question
1:19and answer period I will ask as many
1:21questions as time permits now it's time
1:25to introduce our head table guests I'd
1:27like each of you to stand briefly as
1:29your name is announced from your right
1:33Ed barks president of barks
1:35Communications and a member of the
1:37national Press Club Board of Governors
1:39Michael Justin Lee University of
1:41Maryland Department of
1:43Finance Tommy Burr Washington
1:46correspondent for the Salt Lake Tribune
1:49and the treasurer of the national Press
1:51Club On The Board of Governors Tommy we
1:53thought it would be good if you come
1:54today and listen to some advice from our
1:57guest
1:58speaker Oscar surus director of the
2:01Wells Fargo Corporate
2:03Communications Marilyn gwax senior
2:06business editor at NPR and a member of
2:09the NPC Board of Governors Mike Golden
2:13president Wells Fargo greater Washington
2:15DC
2:17region Jerry zsky Buffalo News bureau
2:21chief in Washington chairman of the NPC
2:24speakers committee and a past NPC
2:26president skipping over our speaker for
2:28a moment Casia kinska of Bloomberg News
2:33and the speakers Committee Member who
2:34helped who organized not who helped who
2:37organized today's event thank you so
2:39much
2:40Casia Anita eloff director of the Wells
2:44Fargo federal government
2:47relations Emily Stevenson Thompson
2:50Reuters reporter who covers Bank
2:53regulation Anthony shop co-founder and
2:56chief strategy officer of social driver
2:59and a member of our Board of Governors
3:01Keith Hill editor writer with Bloomberg
3:04BNA and a former NPC vice president
3:08thank you
3:08[Applause]
3:14all as the chairman and chief executive
3:17officer of San Francisco base Wells
3:20Fargo John stump runs the world's
3:22largest bank by market value it's also
3:26the biggest US mortgage lender it took
3:28about 200 50 deals to arrive at that
3:31point and stump has been involved in
3:33more than 100 of them among them is the
3:3712.7 billion purchase of ovia
3:41Corporation in 2008 during the first
3:44quarter earnings conference call with
3:46investors he raised the possibility of
3:48further Acquisitions to expand into
3:51wealth management brokerage or
3:53retirement businesses his challenges
3:56include dealing with an increasing
3:57number of laws regul ations and
4:00Regulators created after the financial
4:03crisis as well as navigating through the
4:05Rough Waters of slow economic expansion
4:08and record low interest rates due to its
4:11large mortgages portfolio Wells Fargo is
4:14particularly vulnerable to changes in
4:16the jobs and housing markets Mr stump
4:20needs to make sure that the bank
4:22observes sanctions against countries
4:24such as Russia and Iran and anti-money
4:28laundering rules to avoid fines such as
4:30the record $8.97 billion slapped on BNP
4:35Pera earlier this year his
4:38responsibilities also include ensuring
4:40that credit card data breaches such as
4:43those reported by Home Depot and Target
4:46do not happen under his watch and he
4:49also has to satisfy his clients and
4:52investors including the largest one
4:54Warren Buffett's Berkshire haway ladies
4:58and gentlemen please join me in
5:00welcoming to the National Press Club
5:03John stump the CEO of Wells Fargo and
5:06John I'd like to use the president's
5:08prerogative and ask if you could please
5:11share your unique personal story of
5:13growing up in rural Minnesota on a dairy
5:16farm as one of 11 children ladies and
5:19gentlemen Mr John
5:20[Applause]
5:28stum
5:30what a great introduction in fact that
5:33might be the second best one I've ever
5:36heard I I was in Texas last week the
5:38guidance shops I did it myself but other
5:40than that it was
5:42uh so one of 11 kids on a family farm
5:45what I ought to tell you is those 11
5:47children came in 13 years and no twins
5:50so um yeah Catholic and Rhythm so we'll
5:53get that off the table right off
5:55that so people in California just can't
5:58get over this you know in Minnesota
6:01where I grew up that was a fairly
6:03average siiz family but in California so
6:06they'd ask me now were you part of a
6:08commune and I said no no no just one Dad
6:12one you know mother but then they get
6:15back down to two questions that are
6:17actually pretty good questions how many
6:19bathrooms did you have in this Farmhouse
6:22the answer was we had one well we
6:24actually had one and a half as opposed
6:27to a powder we had a ous but if you used
6:30it after uh Thanksgiving they didn't
6:32find you until Mother's Day so that was
6:33you had to be careful about that but the
6:36second question is always my favorite
6:38how many bedrooms did you have in this
6:41house and the answer was for our
6:43children we had two we had a North room
6:46where my four sisters slept and in the
6:49South room I slept with my SE my six
6:51other brothers or seven of us and back
6:53those days you could not divide three
6:56beds we had evenly into seven or seven
6:58into three
6:59so one bed had two the second bed had
7:02two and the third bed had three and
7:05since I was the oldest boy I was in the
7:07middle my brother Philip was on my left
7:09and brother Steve was on my right in
7:12fact I never got a chance to sleep alone
7:14until I got
7:15married all right
7:17okay all right now if you guys going to
7:19be difficult
7:23here boy when you tell me all the things
7:25I'm responsible for I don't have time to
7:27give a speech I got to go check all
7:28those things
7:30since now you know me let me tell you uh
7:34in a few minutes a little bit about our
7:35company I want to talk a little bit
7:37about the economy I want to talk a
7:40little bit about our industry and then
7:42my favorite time will be when I get to
7:43answer your
7:45questions our company is now in its
7:49163rd year of business our birthday was
7:52on July 13th and we started in
7:551852 in fact there was a Wells Henry
7:59well well or was a Fargo William Fargo a
8:01few years earlier they started another
8:03iconic American company called American
8:06Express in the early year months of two
8:101852 they decided to start a business
8:13west of the Mississippi and they were
8:15the internet of those days they were
8:17going to move people in a stage coach at
8:205 miles an hour from St Louis every 10
8:23miles you change six horses and you find
8:25yourself in San Francisco a couple days
8:28or weeks later
8:30and from those humble beginnings
8:34starting out our Stage Coach which you
8:37probably know today as our logo was only
8:40in existence for a few decades Because
8:43by the late 1860s the railroads came
8:46through so we had to reinvent
8:49ourselves and I'll tell you one
8:51particular story in
8:531918 at that time we had 10,000 offices
8:57across the country we connected the
8:59country we were ups and we were uh FedEx
9:03before we ever heard of them and
9:06somebody sitting in my office the
9:07president at the time got a call from
9:10the Secretary of Treasury it was in
9:12March of the Year
9:131918 and the government announced
9:15through the power of eminent domain they
9:17were going to take all of our offices
9:18but one to help support the World War I
9:21effort now that's a lousy day with the
9:23government so uh so this Dodd Frank
9:26stuff you know I can't get all that
9:27excited compared to those times but the
9:29here is the punchline the company's gone
9:31you know survived through not only
9:33survived thrived through three big Wars
9:37the Civil War the two World Wars others
9:40the Great Depression the Great Recession
9:43almost every economic environment you
9:45can imagine all kinds of technology and
9:50changes and today I want to give you a
9:52quick tail of the tape we have
9:55265,000 team
9:58members 97% of our business is in the US
10:0297% of our people are in the
10:05US we serve one in three Americans One
10:09Way Or
10:10Another We're a real economy
10:14Bank we don't know really anything about
10:16cornering the aluminum Market but we
10:19know a whole lot about helping small
10:21business
10:23consumers corporate customers others
10:26planning for retirement in fact
10:29we make more auto loans than anybody
10:31else on the planet we make more Home
10:33Loans we do business with one tenth one
10:36in 10 of all small business in America
10:39the next closest competitor does you
10:40know is half that share we make more egg
10:43loans we make more energy loans
10:47commercial real estate if you travel
10:48around the country today you think
10:49there's a crane convention going on
10:51there's cranes everywhere we do more of
10:54that than anyone so that's what we do
10:57but it's not the only part part of our
10:59culture philanthropy also plays an
11:02enormously important
11:04role the company's size is measured
11:07different ways and we've never been
11:09impressed with size we're the 27th
11:11largest revenue producer in the
11:14country last year we were the third
11:16largest earner were the either the ninth
11:19or the 12th largest private employer but
11:21on the philanthropy side in 2012 no
11:25company in America invested more in
11:28their communities with philanthropy than
11:29Wells Fargo last year we were number
11:32two our team members through their own
11:36willingness which is Again part of our
11:37culture has been the number one United
11:39Way campaign corporately for the last
11:41five years and thank
11:48you and people ask me why is that such
11:51an important part of your culture and
11:53the answer is very simple we live we
11:57work we recreate we go to Church we're
11:59part of local communities we have never
12:01seen our bank do well over time where
12:04the community does poorly they're linked
12:06in a very special way and finally we
12:09have stockholders and as the
12:11introduction when you heard that you
12:13heard about our largest owner Warren
12:15Buffett who owns almost or over 9% of
12:18our company it's his single largest
12:20investment if you look at size of
12:23Institutions we're not even the top 20
12:25in the world I think we're number 21 or
12:2722 we're not the largest in the US
12:31although we have more locations here we
12:34have more people here than any other
12:36bank but we're not the largest in asset
12:39size but if you take our Market
12:41capitulation number of shares times our
12:43stock price we are far and wide the most
12:48valuable Bank in the world so if you
12:50hire great people treat them as family
12:53take care of customers most of our
12:55customers have been with us for decades
12:57and we do lots of stuff stuff with them
12:59they're our friends if you give back and
13:01invest in your communities your
13:03stockholder can get rewarded and will
13:04get rewarded and by the way we've been
13:07one of the largest taxpayers in the US
13:10for years in fact last year I think our
13:12cash tax rate was
13:1532% so let me now move on to the
13:18industry or the economy and then we'll
13:20talk about the
13:22industry
13:24recoveries are not pleasant things to
13:27watch if you like steady continual
13:30progress they're kind of
13:32messy in fact we are now six years
13:37anniversary since the Layman bankruptcy
13:39September 15 and we're five years since
13:44the recovery
13:45started and it doesn't feel like a
13:49fullblown recovery even though the
13:51unemployment rate is now down in the low
13:55sixes we've had steady GDP growth and
13:59we've had some unusual things happen
14:01this year in fact in the first quarter
14:03we saw a big drop in GDP growth and we
14:06had a very strong second quarter and it
14:08would not surprise me if third and
14:10fourth quarters both started with a
14:12three
14:13handle we've been growing jobs at 220 to
14:16230,000 jobs per month and also in
14:19August comes around we have
14:23145,000 so there's lots of different
14:25mixed messages I'll tell you right off
14:28the bat
14:29the economy feels a bit stronger to me
14:33than some of the recent numbers would
14:36show and we are optimistic about what's
14:40happening in America and optimistic
14:43about our future in fact I'm actually
14:45bullish about the long-term
14:48Future Let's Take a look at the economy
14:51from 2 2007 the so-called goo years the
14:54great years and then compare the economy
14:57today to that and let's for just a
15:01minute exclude residential real estate
15:04out of both
15:06economies the economy today is better
15:08than it was from 2000
15:112007 energy is booming energy is the
15:14best it's ever been in fact energy we
15:16might be self-sufficient energy and the
15:18largest energy producer in just a few
15:20years and we're also making great stes
15:23in Renewables Autos the number of Autos
15:27sold in August if you annualize August
15:31it'll be the best auto month for since
15:352006 and there was just a month or two
15:37there it's really almost the best since
15:392000 we're going to sell 16 17 million
15:43new vehicles this year and by the way
15:45the average Fleet if you took the United
15:48States Fleet is about 11 years old so
15:50there's going to be good news in
15:51industry for some time agriculture doing
15:55very well not all parts of Agriculture
15:58because of theug out some of the uh the
16:00cattle feeders are having a more
16:02difficult time but generally speaking
16:03good technology booming commercial real
16:07estate doing very very well so if you
16:10look at start to separate the elements
16:13of it I think we're doing quite well and
16:15Manufacturing starting to come back not
16:17as much as we need and I'm hugely
16:20bullish on on or I I understand the
16:24importance of
16:25manufacturing but let's take housing
16:29typically in a recovery and it's this
16:32way for
16:34everyone since you know the end of World
16:36War II every recovery is led by housing
16:40residential real estate and not this
16:43time in fact housing is better it's
16:46better everywhere it's not better for
16:48everyone and it's not as good as it can
16:51be so why is
16:53housing not
16:56leading in fact there's lots of disc
16:58discussion here in Washington lots of
17:00discussion around the country about what
17:03are the elements and it's no one thing
17:06but it's four or five things in
17:08aggregate create a big
17:10thing first of all households are
17:13forming later today than they have in
17:16the past I got married when I was 21 my
17:20wife was 20 and we bought a house the
17:22next year now my children are getting
17:26married in their 30s and that's
17:28happening where children are living with
17:32parents so that's a big change from what
17:34it used to be secondly student debt is
17:38an influence 40 million Americans have a
17:42student loan in fact student lending has
17:46almost
17:47doubled in the last six
17:50years and that has an influence in fact
17:53there's more student debt the biggest
17:55debt uh category for americ Americans is
17:58housing there's 5050 million homes in
18:00America with a mortgage on the average
18:02mortgage is $200,000 is $10 trillion wor
18:04a debt it's surprised to some people the
18:07next group is student debt there's more
18:09student debt than there is you know Auto
18:13debt or home equity debt or credit card
18:16debt so it's so it is and people are
18:20paying those payments not able to buy
18:21houses so that's a part of it not all of
18:24it another area is that in some markets
18:27housing are not available inventory is
18:30not available I happen to live in San
18:32Francisco and in the Bay Area you bid on
18:36a house you come with 27 of your closest
18:40friends and you keep running the price
18:42up because there's just simply no
18:44inventory that's not true across the
18:46country but it's true in many of the hot
18:49markets surely the coastal
18:51markets and the one I want to spend a
18:53little more time on is one that we
18:55actually can do something about and
18:57that's credit not available for every
19:00borrower who wants to buy a house who
19:02can afford a
19:03house and wants to make that that
19:06decision and
19:07commitment and this is going to get just
19:09a bit technical but it's really
19:12important in the United
19:14States since the housing market is so
19:17huge 10 trillion
19:20do we need a secondary
19:23Market to help finance that debt there's
19:27only 10 trillion wor with deposits in
19:29the country and of course deposits are
19:31used to make loans on for businesses and
19:35to the federal government and for
19:37consumers and a whole bunch of other
19:38things there's like 25 or 28 trillion
19:41wor a debt so the way the United States
19:44finances homes is Fanny or Freddy known
19:49as gsse or the
19:52FHA guarantee mortgages against loss and
19:56with that guarantee originary like us
19:59and others originate those loans and
20:01then sell them off to
20:03investors and it makes credit available
20:07at the prices we have and so
20:09forth what's happened over time is that
20:14the mortgage
20:15companies the insurance companies if you
20:17will put loans back to The Originators
20:20and say this doesn't qualify for your
20:24insurance and sometimes they put them
20:27back even if they paid for 10 years or 8
20:31years or seven years and they're put
20:34back many times for
20:35technicalities on the first page it said
20:38John G stump and the second page it said
20:40John Gerard stump that's a technical
20:43default and it comes
20:46back and what banks have done and
20:49Originators in fact there's a whole lot
20:51of Originators who aren't banks these
20:52are small companies that's always been
20:55the
20:56case what they're doing is saying
20:59even though the insurance companies the
21:01the fannies and Freddy's FH say we will
21:04insure a loan that has this requirement
21:05this this and oh by the way from a
21:07credit perspective a FICO score down to
21:10580 or 600 we're saying uh-uh we're only
21:14going to do it down to 650 or 670 we put
21:17a credit overlay on it so there's a
21:20certain part of the
21:22market that can't get a conforming
21:26mortgage because we know in this group
21:28there's going to be more default and we
21:30know what happens that they're going to
21:32put it back to us so we're trying to
21:35find a way to work with the government
21:39agencies to find a time when does credit
21:43and when does risk
21:45transfer if a company if a customer now
21:47if a if a originator originates Al loone
21:49they do a lousy job and they don't
21:51verify no do things it should absolutely
21:54come
21:55back but if they originate loan and they
21:59do the best job they can and there's a
22:01default
22:03later and the defect is unrelated to
22:06income or unrated to the company paying
22:08the customer paying it it should not
22:10come back so here we have a
22:12situation where we have the unintended
22:16consequences of well-intended
22:17legislators or Regulators who are
22:19actually hurting the marketplace in fact
22:22we're now joining and or or you
22:25community groups are joining with us
22:26saying how do we open the credit box
22:29more let me now uh segue and I think
22:32we're down
22:33to how many more minutes eight more
22:36minutes okay great we'll talk about the
22:37industry I could talk for 80 minutes
22:39about too big to fail but I'll try to do
22:41that in uh in just a couple
22:43minutes there is wide agreement in
22:47America and I'd be the first to say it
22:50there should be no company too big to
22:53fail in any industry surely not
22:56Financial Services failure is an
22:59important part of the free enterprise
23:03system now where there is a disagreement
23:07is has enough been
23:10done to deal with this issue through
23:13Dodd Frank and other
23:15things and and
23:18sometimes one
23:20forgets how much has been done so if I
23:24look back
23:26to 2008
23:29we now have almost
23:3014,000 pages of new rules
23:35written we have the vulker amendment now
23:39it was never a big proprietary doing
23:41business with yourself was never a big
23:42deal for us anyhow but for some
23:44companies it
23:45was the term stress test is in the
23:48common vernacular we all know about that
23:51probably most you don't know what
23:52happens twice a year it gets most of the
23:55notoriety because it happens once a year
23:56with a Capital distribution element to
24:00it there's something called living wills
24:03or your your your funeral
24:06arrangements there's heightened
24:09expectations there's new Regulators like
24:11the
24:12cfpb and all of those I would say would
24:15F qualify more in the qualitative side
24:19although there are quantitative parts of
24:21that but in the quantitative side
24:23there's also been significant change
24:26look at Capital requirements
24:29Wells Fargo went through the most
24:32difficult economic environment any of us
24:34would have seen in you know unless
24:37you're my parents age who went through
24:39the Great
24:40Depression and today our capital and
24:43with and we made profit operating profit
24:44every quarter uh we bought a big company
24:47using our own
24:48money and today our Capital went from 99
24:52billion then to 181 billion today almost
24:57doubled
24:59but you'd say just a second now most of
25:01these Banks didn't fail because of
25:02capital they fail because of liquidity
25:04and you'd be right about that today
25:0824% of our balance sheet is in liquid
25:12assets most of it on deposit with the
25:14FED we've run our company for years $1
25:18of deposit $1 of
25:20loan today we
25:22have $8 of $1 of deposits $8 with
25:28loans so we have a huge amount
25:32there there's been discussion about
25:34adding to this G cify buffer which is a
25:39fancy acronym for Global systemically
25:41important financial
25:42institution The Leverage ratios have
25:45changed any one of these things I just
25:48talked about whether it be you know in
25:51enhanced uh enhanced requirements
25:55different Regulators uh uh you know
25:57living Wells Capital
25:59liquidity all make sense in the singular
26:03but in the
26:05aggregate it's a large load and my qu my
26:11answer to critics would be give this
26:14stuff a chance to work and by the way
26:18there is a economic
26:20price the economy does
26:23pay if you are going to have
26:27overregulation
26:28and too much capital and too much
26:32liquidity on the
26:33sidelines in fact today what's happening
26:36the regulated box what happens within
26:38the regulated side of the industry is
26:40shrinking and what's happening on the
26:42outside of the regulated industry the
26:44non-banks are growing the risk isn't
26:46going away it's just changing to
26:48different
26:49places so uh and and I would be hopeful
26:53also that our Regulators look at just
26:55something other than size and look at
26:58the complexity the
27:00interconnectedness of
27:02organizations and just like in the
27:04housing area less credit available at
27:07higher prices for fewer people and so uh
27:12from a industry perspective that's
27:13something we we are always thinking
27:15about let me end by talking a little bit
27:18about how I think our industry generally
27:22and how Wells Fargo will be successful
27:24in the future because we're in a long
27:26sales cycle business in Investments that
27:28we made five and 10 and 20 years ago are
27:30being harvested today and we need to
27:32make investments today that will have
27:35the company continue in the
27:37future first of all exceptional customer
27:40experiences people ask me many times
27:43which bank are you most impressed with
27:45when you go to bed at night you know who
27:47do you think about dream about and I
27:49said well I dream about checking
27:50accounts I dream about another bank but
27:52um I'm actually impressed with companies
27:54like Apple and Google and Costco and
28:00Amazon just a second those aren't Banks
28:03well here's how they influence us they
28:06are teaching
28:08consumers what retailing is all
28:11about so we're making lots of
28:15Investments uh to help you know stay
28:19ahead of the curve and make sure that
28:21we're relevant to customers of the
28:23future one of the big debates is our
28:25banking branches we call them stores are
28:28they still
28:29relevant and we think they're highly
28:31relevant in fact in this market we have
28:33three new prototype stores all about
28:371,000 square ft compared to 5,000 square
28:40ft of the traditional and they happen to
28:42be paperfree and they and one of them
28:45happens to fold in at night the walls
28:47and becomes an ATM vestibule and highly
28:51valuable to us and and responsive to a
28:53community we're finding that most of our
28:55loyal customers even m
28:58ials come into a bank branch once every
29:01six months they don't believe they do
29:04they would tell you they
29:05don't but they're using all of our
29:08channels our stores our ATMs our phones
29:10our online and our mobile as a
29:13distribution Community as an omni
29:15channel in fact some of the great
29:16retailers you see like
29:18apple you know they wouldn't need to
29:21have stores but they do and it's it's
29:23part of the magic of of the and so lots
29:26of work going on there and how to be
29:28relevant to our customers how to know
29:30them I've never seen a prospect or
29:32customer to me yet come to me and say
29:35you're so large you're so
29:37impersonal I'm going to join you because
29:39I can be 16272 3 I've never heard that
29:43they say know me help me understand me
29:46and reward me make it very personal
29:47about
29:48me another big issue we're working on is
29:53all things risk when I joined the
29:56industry if you got your loan book right
30:00the rest of it was you know
30:03insignificant in fact that was probably
30:06the case even as recently as 10 years
30:08ago incidentally during the most
30:10difficult time of the downturn we were
30:11losing over 2% of our loans to
30:15losses which actually was not that high
30:17compared to a lot of competitors in the
30:20second quarter of last year of this year
30:23we lost around a third of a percent
30:26almost eight times better credit has
30:29never been better but today you have
30:31things like cyber risk and you have
30:34interest rate risk and reputation risk
30:36litigation risk foreign exchange risk uh
30:40knowing your customer AML risk so lots
30:43of other
30:44things another thing that we're working
30:46on is digitizing the
30:49Enterprise our industry you know has
30:52been in a second day batch process using
30:54paper process and how do our children
30:58communicate with each other instant
31:00messaging so digitizing Enterprise and
31:02using data is another huge opportunity
31:05for our
31:06industry and I think I just have time
31:10where I just uh have to really wrap this
31:12up so and and let me just kind to make
31:13one final comment our customer base is
31:18changing our advocacy for inclusiveness
31:22starts at the top we have 14 outside
31:26directors of our
31:27Company Five are persons of color five
31:31are women
31:34women so leaves only four
31:36others in fact if I look at my 11 direct
31:39reports who report to me as part of the
31:41operating committee the average tenure
31:44that team has with with our company is
31:4628 years and four our women so we see a
31:51disproportionate part of our new
31:53households our new small businesses our
31:55new corporations who come to us bank
31:57with us being either women-owned women l
32:02or from communities of difference and we
32:04have a strong passion to make sure we
32:07have a team that reflects that
32:09diversity so thank you very much for
32:11your attention and I will take questions
32:14thank
32:25you we could go on for a couple of hours
32:28but we're going to uh we could go on for
32:31a few hours but the way we do it I'll
32:33try to politely rapid fire ask questions
32:37and if your answers we can time it in
32:39Wells Fargo's big Home Mortgage business
32:43makes it highly dependent on interest
32:45rates and the broader economy when do
32:48you think the economy will be forming
32:49well enough to allow the FED to increase
32:52interest rates and how will the housing
32:54market in Wells Fargo be affected when
32:57that
32:58happens thank you I should have
33:00mentioned that I appreciate all you
33:02being here today because this isn't the
33:03Big Show in town it's you know it's the
33:05fmoc uh uh Janet Yellen and all her
33:08comments which we're going to hear in
33:09just uh as soon as we're done here um
33:12well first of all Wells Fargo has about
33:15an 18% share in the mortgage business
33:17but about six or seven of those points
33:19are an aggregate business we help small
33:22Originators give them money so they can
33:25complete or or or liquify their mortgage
33:28so our direct part of the business only
33:30about 11 or 12% and we have about 10% of
33:32the deposits in the country there's
33:347,000 banks in the deposit business
33:36there's only a few hundred in the
33:37mortgage business so I don't think we're
33:39oversized there and
33:41secondly unless you're over 40 years old
33:45you think these rates are normal when I
33:47got my first mortgage in 1976 was 8 and
33:49a half% and I got my second one in 1980
33:53at 11% I was darn lucky to get the money
33:56so uh so I think rates the affordability
33:59index is still very attractive if you
34:02look at there's three important things
34:04when you buy a house the cost of the
34:05house what you make and what the
34:07interest rate is on your mortgage you
34:10know two of those still are you know are
34:12in very good shape especially interest
34:13rates so I my my suspicion is we are
34:18positioned for higher rates and I'm in
34:21favor of having rates reflect the
34:23strength of the economy uh so and but I
34:27don't know when that's going to happen I
34:28thought it would have happened by now
34:30but I've been I've been wrong all along
34:32but I do think that uh uh Whatever It Is
34:35overtime surely there's a bias towards
34:37the
34:39upside A lender survey released today by
34:42fatty May found that large lenders
34:44expect mortgage credit standards to ease
34:47over the next three months as demand for
34:50mortgages drops does Wells Fargo plan to
34:53ease its
34:55standards well this this was again that
34:57discussion we talked about where we have
34:59credit overlays we've already done some
35:01of that uh earlier in the year as kind
35:03of a first step to see if we can't help
35:06out uh and but I don't uh have any plans
35:09to do anything and if we if we would we
35:11would surely announce it uh ahead of
35:13time but there are I don't have any
35:15plans
35:16today as you mentioned in hot Urban
35:19markets such as Washington young people
35:22are finding themselves priced out of the
35:24homeowners Market what has happened to
35:27the American dream of home ownership and
35:29how do we make sure that young people
35:31are able to achieve it just as previous
35:33generations
35:35did that is a terrific question in fact
35:38in the last two years Wells Fargo has
35:41given to cities almost $200 million no
35:46strings attached to help with home
35:48ownership because we want to test this
35:50idea has America has Americans lost
35:54their interest in owning a home in fact
35:56we did a recent study about how America
35:58thinks about home ownership and no it
36:01there's still a very strong desire in
36:03fact those monies were used very quickly
36:06as down payment uh dollars or help to
36:09fix up a home so people could get into
36:11Home Ownership so now it's it's a very
36:13it remains for two-thirds of of
36:16Americans still a high priority it's
36:19probably the most the biggest thing
36:20will'll ever do financially and
36:23inventory and affordable inventory in
36:25markets like the district and other
36:28places is a real
36:30issue you spoke about the fact that many
36:33young people are saddled with student
36:34loan debt do you have any suggestions
36:37for how we can make sure that future
36:39Generations don't face such a heavy loan
36:43burden yeah maybe I should do first is
36:46make sure everybody's on the same
36:48wavelength there's about 1.2 to $1.3
36:51trillion of student debt 92% of that is
36:56through the federal government only 8%
36:59is private student debt that debt has
37:02almost doubled in the last 6 years and
37:05so this is you know this is really an
37:08issue between the federal government and
37:10schools and so forth incidentally School
37:13tuition has risen two and a half times
37:16the rate of inflation over the last 10
37:18years so and the performance in the
37:20private area our student loan portfolio
37:23which is very small we're in that
37:25business because it's important to
37:26family
37:27is less than 2% delinquent where if you
37:30take the delinquency on the federal side
37:32it's eight or nine times that number so
37:36this is a big issue I know there's a lot
37:38of discussion here in Washington I'll
37:40let Washington deal with that but it
37:41clearly is an issue thank you as you
37:45noted the current outlook for the US
37:47economy is relatively strong yet there
37:50is growing concern about income inequity
37:53and chronic unemployment or
37:55underemployment especially among the
37:57young How concerned are you about these
38:00issues and how do you believe they
38:02should best be
38:04tackled well that surely uh is an issue
38:07I should mention that as I'm optimistic
38:10about the US economy there are some
38:14geopolitical it's a more dangerous world
38:16today and as you probably saw China is
38:20slowing a bit and the Euro zone is you
38:23know Treading Water especially the the
38:25larger economies there so that does have
38:27an influence on the US um
38:30clearly jobs have not kept up uh with in
38:35in many sectors uh in many situations
38:38with the economic growth that we're
38:39seeing has been quite uneven and I do
38:41worry about the inequities and the
38:44differences and there's different ways
38:46to solve for that but I think the more
38:49we can get business engaged in hiring uh
38:54people want to work and it's more about
38:56it's it's partly paycheck but it's also
38:58partly me part of the solution the
39:00dignity that comes with a job and uh
39:03like I tell people I don't need to go to
39:05a focus group to find out what's
39:07happening in America I go to a family
39:08reunion I've got I've got family members
39:11in every Rong of the economic ladder and
39:13it's a real
39:14issue you've touched on some of this but
39:18what in your opinion could stand in the
39:20way of future economic growth in
39:25America I think uh first of all I'm in
39:28favor of good
39:29regulation I want good uh honorable
39:34competitors doing the right thing that
39:36helps us but I want to make sure we
39:39don't go overboard and that's not only
39:41true for our industry for any industry
39:44secondly when Washington behaves badly
39:49and you can Define that any way you want
39:51to it has an impact on the real economy
39:54we saw in the past where debt ceilings
39:57were breached and fiscal cliffs were
40:00coming and going that's hard on the
40:03economy uh but the third thing I think
40:05it's not only not doing things that hurt
40:07it's doing things that help and anything
40:10that helps jobs here I'm in favor of and
40:14one of the things that you know surely
40:17is on the table is do we have the
40:19appropriate tax policy to promote jobs
40:22in America and especially manufacturing
40:25jobs
40:28bit of a
40:30segue the justice department said today
40:33that it is investigating potential
40:36illegal conduct by individuals at Major
40:39financial institutions that undercut the
40:42Integrity of the markets the Department
40:45of Justice said it hopes criminal
40:47charges will be filed in these cases in
40:49the coming months do you have any
40:51comment on the Department's increasing
40:53focus on wrongdoing at Major Banks and
40:56and also the announcement today that
40:58bigger rewards will be given to Wall
41:00Street
41:03whistleblowers I have not seen uh that
41:06report but I as a fundamental view I
41:10want to live in a law-abiding country
41:12and if there are wrongdoers uh they
41:15ought to be held accountable and and I
41:17have that's the way we run our company
41:20uh culture is extremely important in
41:22that and uh I think that uh uh we'll be
41:26better as a people uh when things are
41:28done in an appropriate manner again I've
41:31not seen that report I don't know
41:32exactly what's happening there but um
41:34but I'm in favor of holding people
41:39accountable turning AB broad for a
41:41moment is Wells Fargo considering
41:44expanding abroad through Acquisitions
41:46why or why
41:49not 97% of our revenues and our people
41:52are here in in America I mean if I don't
41:55play a game called Texas Holden but
41:57apparently there's there's a time in the
41:59game where if you believe you got a gry
42:00hand you go all in we're all in on
42:03America and our 3% international
42:07business which we
42:08love is mostly an extension of helping
42:11our us-based customers consumers and
42:13businesses do business internationally
42:15so uh in fact I think if you look at the
42:18regulatory regimes around the world
42:21there is lots of Interest through what
42:23they're doing to bring their Banks back
42:25home if you will
42:26so uh I don't see us I see us uh doing
42:30most of our work here in the US uh you
42:33never say never but uh we are largely
42:37based here and and what we do
42:39internationally is pretty much in
42:41support of our
42:44customers even though most of your
42:45business is in America you might have a
42:48comment on the following as you know
42:49tomorrow uh the Scottish referendum
42:52takes place if Scotland votes yes for
42:55Independence could it it affect global
42:57financial
42:59markets well that's out of my pay grade
43:02I I don't uh much as I know about
43:05Scotland comes in a bottle of Scotch I
43:07only do
43:08that I and I don't mean that in a
43:10negative sense at all I I do that once a
43:12year but um
43:15uh I really I don't have a position on
43:19that I would come back domestically if
43:22you had spoken at this Podium six years
43:24ago today in the of the financial crisis
43:28there's no doubt you would have
43:29delivered a very different speech
43:31looking back on the crisis how well do
43:34you think the United States government
43:35responded and how bad could things have
43:38gotten if the government had not
43:39responded as it
43:42did you know I've um I think about that
43:45from time to time but I don't dwell on
43:47that because there are such Harden views
43:51about the need at the time and it's easy
43:56to go back and money money quarterback
43:58but for those policy makers you know on
44:01the controls who had the levers and the
44:03buttons at the time it was a difficult
44:05period to think about you know first
44:07bear and then you know the gse's and
44:10then you know Layman currently broke the
44:13the back and then WAMU and wacovia so
44:16there was a a lot going on um you know
44:21at our time uh you know we didn't ask
44:24for the money we didn't believe we
44:26needed it we paid it back in a year with
44:28with lots of interest uh so I tend to
44:31want to focus forward and um you I'll
44:34let you know historians in the future
44:37look back at this period of time it was
44:38clearly a difficult time let's see if we
44:41can make the best of it going
44:47forward what would be your prescription
44:51for Washington DC lenders so that the
44:54Wells Fargo culture can help fix our
44:56government to work
44:59better excuse me let me rephrase that
45:03what would your prescription for
45:05Washington DC leaders be so that Wells
45:08Fargo culture can help fix our
45:10government to work
45:13better well you know I'm lucky compared
45:15to the government I have a team who love
45:20working at Wells the average 10 years
45:23has been 28 years of my direct reports
45:25and every two years they don't get an
45:27option to get rid of each other so I
45:29mean so I it's it's a bit different but
45:31I would say
45:33this we play us ball at Wells Fargo
45:36that's part of our culture not that me
45:38is not important the pro the possessive
45:41pronoun but never at the cost of the
45:44plural
45:45pronoun so and I don't know how to be
45:48successful other than that in fact when
45:50we have people we interview people we
45:52care about you know we care more about
45:54what they care about than what they know
45:56we always can teach them something to
45:57know so I think if we put country first
46:02and and maybe party second which I know
46:04is hard to do uh you know that's that's
46:07at least in our business we don't put
46:09our business first we put our customer
46:11and our company
46:18first we're getting more questions
46:21focusing of course on how Wells Fargo
46:23did during the financial crisis and
46:26Wells Fargo weathered the financial
46:27crisis in far better shape than the
46:29other Mega Banks largely because it did
46:32not take the same kind of risk it was as
46:35if Wells Fargo was not part of the Wall
46:37Street culture of the time why was
46:42that you know it's first of all we're
46:45not on Wall Street I mean not that I I
46:47mean we do some sophisticated things for
46:50top-end clients but we are very much in
46:53the real
46:54economy and
46:57what you do during boom times is much
47:00more important than what you do during
47:02the down times so I'll just give you a
47:06quick story back in 2003 or so Wells
47:11Fargo was the largest mortgage company
47:12in
47:13America not that we wanted to be the
47:15largest it's just that we we thought we
47:18were doing a good job for our
47:19customers then we started to hear about
47:23negative amortising loans and what those
47:26are is you buy a house and let's say you
47:29borrow
47:30$500,000 and the interest rate is 8% so
47:34you owe $40,000 a year of Interest which
47:37is about 3500 bucks a month but the bank
47:41says to you no no only pay us $1,000 a
47:44month we'll take the other 2500 We'll
47:46add it to your principal called negative
47:49am so you owe more later than what you
47:51started with and we said really
47:56this isn't how is this customer friendly
47:58how can this help customers succeed
47:59financially which is our you know that's
48:02part that's what we can do every morning
48:04in fact I tell our people when you get
48:06up in the morning and go to work your
48:08most important job is not to make
48:11money Buffett knows that all our
48:14investors know the most important things
48:15to serve customers the result is you'll
48:18make money never put the stage coach in
48:19front of the horses so what we did is we
48:24got up we gave up market share we became
48:27number two then number three others were
48:29doing this stuff and layered risk on on
48:33you know tell me what you make loans and
48:35liars and this sort of thing like that
48:37and when when it all blew up that's when
48:41we got big in the business because you
48:44make your best loans after a downturn
48:46not going into one so so it's just it's
48:50a focus on customer we weren't I tell
48:52you I didn't see this bubble coming I
48:54didn't see 2008 coming and I'd been in
48:56the industry since since 1975 because I
48:59didn't have an appreciation for all that
49:00was going
49:01on but and we didn't do everything
49:04perfectly we didn't make every right
49:06decision but when you put customer first
49:10and really honor that um stick with your
49:14customers good things generally
49:18happen thank you Mr stum you mentioned
49:21Mr Buffett what influence does Mr
49:24Buffett have on operating
49:28decisions uh he could have as much as he
49:31wanted but he has none because he
49:32doesn't ask for it um first of all
49:35Warren is just a terrific human being
49:38and I'll tell you just a quick story
49:40because he's I could tell stories all
49:41day on Warren Buffett so I got to know
49:44Warren just a little bit before I became
49:46CEO because I play online bridge and
49:48anytime I need a a good Shelli and I
49:51play with him because he's a he's a he's
49:53a very accomplished player in fact
49:54Sharon osber one of our former team
49:56members is his partner and and they're
49:58they're tough at the table but once I
50:00became CEO we started doing a home and
50:03home dinner or lunch so my first time to
50:09uh Omaha to have dinner with them we
50:12went to I can't remember was Piccolo
50:13pizzer
50:14gares and Warren eats a full meal let me
50:18tell you he has a T-bone steak medium
50:21rare side of chicken
50:23parmesan uh mashed potatoes
50:26uh Cherry Coke and when the food
50:31comes Warren grabs a salt shaker in his
50:33left hand and one his right hand and
50:35it's a snowstorm and I I I know a
50:37snowstorm when I see one because I'm
50:39from Minnesota and I said
50:41Warren what does your doctor say about
50:44all this sodium he looks at me like
50:46doctor really you know no doctor and no
50:49directions so I said warrren seriously
50:52uh this is not good I said is I said is
50:55is health
50:56you know strengthen your family what's
50:58your genealogy like he said well really
51:00he said uh his father I think passed
51:02away earlier I can't remember exactly
51:05what the time was but he we started
51:06talking about colon issues in colon
51:09cancer and and he said I said Warren
51:12that's really important you got to get a
51:14colonoscopy that's an absolute
51:16requirement he said well I did few years
51:18ago 10 years ago he said he said and
51:20they actually took a foot out he said
51:21I'm I'm great now but he said I went to
51:23the hospital with a colon I came out
51:24with a semi colon that's now that and he
51:27laughs at that so that Warren had me now
51:29how much this is all true but he had me
51:31going the whole time he's but but here's
51:34about
51:35Warren I remember another story we were
51:38at an event last fall where we had 500
51:41of our Bankers together and he was kind
51:43enough to come which is a rare occasion
51:45and we were sitting next to one another
51:46on the stage we were doing a hour an
51:49hour and a half side by side you know
51:52remember old enough remember Huntley
51:53Brinkley were kind of doing that side
51:55side by-side thing and one of our team
51:57members these are all of our team
51:59members somebody from the audience says
52:01to him Mr Buffett how do you decide what
52:05companies to invest in because Warren is
52:07very disciplined about he has got an in
52:09basket that says yes one that says no
52:11and one says too difficult you know so
52:12he says you only do what you know and
52:15without missing a beat Warren I'm
52:16sitting right next to him and Warren
52:18says I like to invest in companies that
52:19are so simple to run even an idiot can
52:22do it because sooner or later one
52:24will
52:27but but Warren what's so special about
52:30Warren he takes the Long
52:32View and he understands
52:37culture he understands risk he
52:39understands the human nature and we are
52:42so fortunate to have him as our largest
52:45investor and for us to be one of his his
52:47largest holding from the best investor
52:49the world's ever known and for those who
52:51don't know him the best person in the
52:52world's ever known so I'm um I can't can
52:55be objective he's that good a
52:59person immigration is one of
53:03Washington's long-term issues from the
53:05Wells Fargo standpoint what needs to be
53:08done do you think more needs to be done
53:10to allow well educated immigrants to
53:12come to the United
53:16States well let me just say first off
53:18this is an issue that is best dealt with
53:22here it's an issue that needs to be
53:24dealt with you know we're a nation of
53:26immigrants my family uh my dad's side
53:29the family came here in the
53:301850s uh since we Bank all over the
53:34country we serve many first generation
53:38immigrants and others uh we've always
53:41won in this country as a team you know
53:45I'm just hopeful that however it goes
53:48that Congress will have the will along
53:51with the administration to deal with
53:52this
53:54issue
53:56does Wells Fargo support the Securities
53:59and Exchange Commission advancing a rule
54:02that would require Brokers to act in the
54:04best interest of their clients when when
54:08providing retail investment
54:11advice you know I don't know every
54:14regulation every rule but I think what
54:15we're getting at here is going from a
54:18suitability standard to a fiduciary
54:20standard and I think that any of our
54:2516 or 17,000 wealth advisers want to do
54:30that every day to do things that are
54:33only appropriate but in the best
54:34interest of the
54:37client you mentioned the growth in the
54:40US Energy industry please could you
54:43elaborate on its long-term economic
54:47impact in fact this is one of the most
54:49exciting things for this country and
54:52without going through a big energy
54:55discussion here let me just tease out a
54:58few facts that maybe you know maybe you
54:59don't
55:00know the the value in BTUs the energy
55:06value in a barrel of oil is six times
55:10that of an mcf of gas metric cubic feet
55:13just so we get that on the
55:16table the average price let's say the
55:18average price for a barrel of oil in the
55:21world is $90 now it's a little bit
55:23higher if you're talking about
55:25this versus Texas site and there's Brent
55:28there's different terms for that but
55:30that would mean if you divide that by
55:32six an mcf of gas should cost
55:36$15 if you go to China or southeast Asia
55:40prices about
55:41$15 if you go to Europe the price is a
55:45little bit less they get gas out of the
55:48U out of Russia so maybe it's 12 dollars
55:52or so what do you think the price of an
55:54mcf of gas in the United States is it's
55:57about four bucks you what do you mean
56:00four bucks isn't this a
56:02commodity no well why don't we just ship
56:05it every place over the world well you
56:07need LG plants you have to liquefy it
56:10and you have to get approval from the
56:12government so and yet we have this gift
56:15of gas everywhere now there's
56:18controversy around that but think of the
56:22advantage we have Visa the rest of the
56:24world
56:25to develop an
56:27industry at a cost Advantage Visa the
56:31rest of the world of maybe a factor of
56:33two or three times that we could put
56:35into the product of finished goods not
56:39even raw product but finished goods to
56:41to supply the world with things that
56:43they want to buy that are
56:47American we are almost out of time but
56:50before asking the last question one more
56:52to go I'd like to remind you about two
56:55upcoming speakers events this Friday
56:59September 19th Our Guest will be Larry
57:01Mero the president and CEO of the CVS
57:05Corporation and next Tuesday September
57:0823rd we will have former Senator Jim
57:11Webb of Virginia and finally I'd like to
57:16present you with the traditional
57:17National Press Club mug I'm not I've
57:19never been inside your office I think it
57:21could maybe you would like to have this
57:23on your desk been waiting for it for
57:24years
57:25thank
57:28you and our last question as the head of
57:31Wells Fargo how often do you get to ride
57:34in a stage
57:35[Laughter]
57:37coach well I'll give you a quick deal
57:40the stage coach if you've ever seen one
57:42it actually had capacity for 18 people
57:45nine inside and and it's not very big
57:49Insite and nine on top and it's actually
57:52a very unique design in that they used
57:54straps leather straps as part of the
57:57suspension and it's really an
57:59interesting wonderful part of our
58:01culture and it's an iconic brand so
58:02thank you very much everybody I really
58:04appreciate
58:12that ladies and gentlemen ladies and
58:15gentlemen thank you all for coming today
58:18we are
58:19[Applause]
58:23adjourned not

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